Short Lease? Why the Leasehold and Freehold Reform Act Could Change the Maths on Extending

A short lease has always meant a landlord or leaseholder had to make a costly calculation about when to extend. New reforms under the Leasehold and Freehold Reform Act (LFRA) are set to change how that calculation is made — and the outcome could differ significantly depending on where the rates land.

What's changing
Currently, lease extension and enfranchisement valuations rely on market evidence, case law, and professional judgement — a system that allows for nuance but can be slow, costly, and uncertain. The LFRA introduces a Standard Valuation Method, giving government the power to prescribe fixed deferment and capitalisation rates used across all valuations, rather than assessing each property individually.

The current benchmark deferment rate — which values a freeholder's right to recover the property at the end of the lease — sits at 5% for flats and 4.75% for houses.

Why the exact rate matters enormously
Government modelling shows just how sensitive these calculations are to small changes. For an illustrative £250,000 flat with 80 years remaining on the lease:

• Reducing the deferment rate from 5% to 4% increases the reversion value from £5,044 to £10,846

• Raising it to 6% instead reduces that figure to £2,363

At a market-wide level, the effect is even starker: against the existing 5% baseline, a 3% deferment rate could mean leaseholders paying around £6.3 billion more to freeholders over ten years. A 6% rate could mean leaseholders paying around £1.1 billion less.

The trade-off: certainty vs. precision
Industry commentary (from Vanessa Griffiths MRICS, ALEP) frames this as a genuine trade-off rather than a simple win for either side. A prescribed rate reduces professional costs, shortens negotiations, and gives both parties earlier clarity — but a single national rate can't reflect the real differences between, say, a prime central London flat and a lower-growth regional property. Where the rate is ultimately set will create clear winners and losers, and the distribution won't be even across lease lengths, property values, or markets.

What this means for landlords and leaseholders
If you're sitting on a short lease and weighing whether to extend now under the current system or wait for LFRA rates to land, the honest answer is: it depends entirely on where the deferment rate is eventually set. Extending sooner locks in today's benchmark; waiting is a bet on which direction reform moves the number.

Source: Landlord Today, 12 September 2026